Should I cancel my Private Health Insurance?

Should I get private health insurance?
(or as a few people are asking) -should I cancel my private health insurance? it seems that I pay $75/month and all I do is go to the dentist 2x a year and get $60 back each time.

The Case For

Accidents happen – better treatment

The main reason for getting private health insurance is that you never know what will happen. You might need surgery that is covered and find that you get treated immediately (rather than having to wait a few years).

Accidents happen –May cost more than you have saved

You may have some savings and may consider ‘self-insurance’ (see reasons against private health insurance below). But if you are required to have lots of medical treatment or a long hospital stay – the costs may far exceed your savings.

Basic info -Medicare Levy & Medicare Levy Surcharge

If you earn above approximately $20,000* you pay Medicare Levy of 1.5% to help fund the medicare healthcare system.

In the 2013 year, if you earn above $84,000 if single or $168,000 (couple) you will pay 1% medicare levy surcharge if you do not have adequate private health insurance.

The 1% extra should really be called Self-insured surcharge or no private health surcharge, rather than Medicare Levy Surcharge.

*the Medicare Levy threshold amount increases if you have children, or are a senior Australian

Avoid paying 1% Medicare Levy Surcharge

So if you earned $84,000 you would pay an extra $840 medicare levy surcharge. So rather than pay 1% of your income for nothing -why not pay extra to get private health insurance and then be covered?

Or if you earned above the Medicare threshold of approximately $20,000 and your comibined income with your spouse is over the $168,000 – then you will also pay the 1% (say if you earned $30,000 and your spouse $140,000 then 1% for you would be $300 and for your spouse $1,400 = $1,700 in total)

Over 30 – will pay more when join

Once you are over 30 the premiums for health insurance rise at 2% per year. If you have continuous health cover before 30, the premiums do not increase (except when the insurance company increases the prices).

30% private health insurance rebate

The government offers a 30% reduction to your health insurance premium (35% or 40% are offered for senior Australians). You can either receive this as a reduced premium (pay less upfront) or as a tax offset (get a refund when you lodge your tax return).

The case against

Won’t pay 1% MLS – Income under threshold

If your income is under the Medicare Levy Surcharge threshold, then you won’t pay extra tax for not having private health insurance.

Are under 30

See above – its only once you turn 30 that the premiums start increasing. So until you turn 30 there isn’t much harm on paper in delaying signing up for private health insurance. (although that doesn’t mean that private health insurance isn’t important for under 30s). I signed up on my own private health policy when I was about 22.

Cost verses paying actual claims

As the question above notes, if you are paying a health insurance premium each month, but getting hardly anything in return.

Good Medicare system

We have a good healthcare system in Australia, which should cover you in an accident/emergency.

You may not have to pay if the accident isn’t your fault

If you are on your way to work or at work, you may be able to claim your hospital costs under workers compensation.

If you are in a car accident but not at fault, you can claim under the other driver.

If you are playing organised sport you may be able to claim under the club insurance policy.

Self insurance

If you don’t get private health insurance, you are basically self insured. Which says that I can pay for myself if something out of the ordinary happens (like needing to go to hospital). Or if something drastic happens (like an accident), then I am hoping that the medicare system will meet my needs.

Don’t pay surcharge as don’t pay medicare levy
If you don’t have to pay the Medicare Levy then you usually don’t have to pay Medicare Levy Surcharge. So if you apply for and receive a medicare levy exemption certificate (for example because you are a veteran or an expat who meets the conditions), you are not slugged with an extra cost if you don’t join up.

I mention Expats, however considering medicare levy and private health for expats is a complex topic and you should speak to an accountant specialised in the area. (for example most expats coming to Australia now will be required to obtain private health insurance from when they arrive)

Special situations

Full time student

If under 18 or full time student under 25 you may still be able to be covered under your parents’ policy. Check with them (and remind them to take them off their policy when you are independent or get your own policy).

My thoughts
I am a diabetic, so I have always thought it best to keep my health insurance. Likewise, it is probably best to keep your insurance. I suppose like car insurance if you cancel, it could be next month that something happens that made you wish you still had insurance.